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Real estate pundits are calling the downturn in the New York residential real estate market, as the NY Sun reports, a "soft landing" versus a "bubble burst." Apparently the fourth quarter was pretty good for some real estate brokers!
What happened? Real estate appraiser Jonathan Miller, who prepared a report for Prudential Douglas Elliman (one of three reports released yesterday), said there were less properties on the market and sellers were setting realistic asking prices. Who knew? The Corcoran Group's CEO Pamela Liebman mentioned foreign investors, empty nesters who are tired of the suburbs and lower mortgage rates as reasons why the market has stayed strong.
As far as the rental market is concerned, rents rose to an average of $2,719/month (a 6.5% increase). Which works out to just under a $700 average for you and your three roommates! And the average price of a Manhattan apartment is now $1.14 million, increasing by 5% from 2005 (the median increased by 9% to $760,000).
Everyone is looking to 2007: The Observer, UrbanDigs, PropertyGrunt [Via Curbed]
Photograph of construction from last summer by Jesse Chan-Norris
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Rent average $2,719 a month?? How do people afford that, go into debt every month?
A mortgage on a house cost less!
The mortgage on a house might be less but you have to add in property taxes and maintenance and insurance. Prior to the huge increases of the last few years buying real estate was about even with renting. Buying is however a forced vehicle for saving which is a good thing.
New York real estate makes up a small portion of the housing bubble. Wages are high in NY. If there is softness there think of what is happening elsewhere? The bubble is huge, and the deflation will be RELENTLESS.
Private sector employment down 40k in December, while NY workers get big bonuses. This glass tower does not translate into reality elsewhere, and we are seeing a recession around the corner, caused by housing. New York will feel this after the hedge fund people lose their shirts in the stock market.
There is no way a mortage on an equivalent apartment is less than renting in this city.
Do the math. It costs nearly twice as much to buy versus renting.
In addition, if you look at the history of real estate bubbles here, there's at least two more years til we get near a real estate bottom. At least.
That $2K in rent is not necessarily cheaper than a mortgage. I have put together a site that does some detailed analysis on what it costs to buy a place (especially in New York). Condos/Coops have many taxes and charges that tend to add up. The rise in rent prices is perfectly reasonable.
http://www.housemath.us
``Rent average $2,719 a month?? How do people afford that, go into debt every month?
A mortgage on a house cost less!''
Not in Manhattan you can't. You would be lucky to be able to afford a studio at that price at the moment. Rentals that I've looked at range around $5-6 a sq ft a month around the EV. That's a real sq ft, though, not a RE broker sq ft (they are [obviously] lying sacks of...) Buying a place seems to average a little under $1K/ft around here. So the rent just about covers the interest on a jumbo-30 year fixed rate mtg but not quite. Then you add in the property tax, opportunity cost on the down payment, likelihood the property will decline in value, community charges and tax writeoffs. It comes out to make a bit of sense to rent...
"Buying is however a forced vehicle for saving which is a good thing."
In the absence of the crazy price appreciation of recent years there is not much savings in it until you hit the latter half of the payments on a 30 yr fixed. If financed via interest-only or other exotic loan it is not a savings account at all.
Agreed w/ Sean & John.
Buying for 5+ years should equal out the curve taking into account a medium term outlook for price appreciation and savings of building equity and tax benefits over this time period; when compared to renting.
If you are looking to sell in under 4 years; seems to make more sense to rent as you will definately see lower living costs renting than buying right now; even with huge rises in rental costs over past 2 years.
Its the transaction costs on both buy side and sell side that most people dont take into account when doing these rent/buy anaylsis. Or the interest gained on a safe 5% money market account if you choose NOT to buy and put down payment + closing costs money to work; way more if you've been in stock market the past 6 months.